Switch, Inc (NYSE: SWCH), a retail colocation provider focused on the enterprise data center segment, today announced that it has agreed to acquire Texas-based Data Foundry, another enterprise colocation provider, for $420m in an all-cash transaction from the Yokubaitis Family. Data Foundry owns four multi-tenant data centers in Austin and Houston, Texas which currently offer 14.2 megawatts of power capacity. During 2020, Data Foundry generated $50m of revenue and $19m of EBITDA (38% EBITDA margin).

In terms of valuation, Switch Inc is purchasing Data Foundry for 22.1x 2020A EBITDA and 20.9x 2021E EBITDA (both pre-synergies). Additionally, Data Foundry’s valuation equates to 19.0x EBITDA, once factoring in $2m of projected run-rate operating expense synergies.

Switch intends to fund the transaction through a combination of cash and borrowings from its $500m revolving credit facility, or new debt securities. Finally, the acquisition will close in mid-2021.

Data Foundry – Overview

Data Foundry’s 14.2 megawatts of power capacity in Austin and Houston, Texas can be expanded by 6.0 megawatts within the existing confines of the campus, and a further 42.0 megawatts upon construction of new facilities on adjacent land parcels. Therefore, at full build-out, Switch Inc will be able to grow its Texas operations to 62.2 megawatts of power capacity.

Data Foundry Critical UPS Power Capacity in Megawatts

Switch Inc intends to commence development on the new data centers in both Austin and Houston at the end of 2021. Thus, the company expects the first sectors to be available for customer deployments in 2023. Furthermore, Switch Inc is exploring the acquisition of additional land in Central Texas to support its future expansion.

Austin, Texas

Data Foundry’s Austin, Texas campus includes three current facilities with 9.7 megawatts of power capacity and expansion capabilities up to 44.2 megawatts, at full build-out. Notably, Switch will build a 30-megawatt data center, in its own format, on a 21-acre adjacent land parcel in Austin.

Houston, Texas

Data Foundry’s Houston, Texas campus has one existing data center with 4.5 megawatts of power capacity and the ability to support 18.0 megawatts of customer power, at full build-out. Notably, Switch will build a 12-megawatt data center, in its own style, on a 10-acre adjacent land parcel in Houston.

Operational and Financial Metrics

Data Foundry’s facilities have 24 on-net carriers and over 2.0k cross-connects. Additionally, in 2020 the company generated “mid-single digit” revenue growth, with a churn rate of 8%.

Transaction Rationale – Switch Acquires Data Foundry

Overall, Data Foundry’s facilities in Texas expand Switch’s portfolio to 16 operational data centers across six United States locations. Indeed, the Data Foundry facilities will anchor the company’s fifth “Prime” data center campus in Texas.

Switch Inc Five Primes Data Center

Data Foundry enhances Switch’s ability to serve Texas and the Central U.S. region with low-latency connectivity. At the same time, the acquisition also improves Switch’s geographic and revenue diversification.

Specifically, Texas will contribute 9% of Switch’s pro forma revenue. In turn, Switch’s dependency on Las Vegas will reduce, with that location now representing 66% of the company’s pro forma revenue.


Data Foundry adds 400+ customers, that have limited overlap with the existing Switch customer base. In turn, this offers Switch cross-selling opportunities with Data Foundry’s largely technology-focused customer base. For example, Apple is a major tenant in Data Foundry’s Austin, Texas facility.

Additionally, Switch highlights customers like HP, Tesla, Oracle, and Dell (a key relationship of Switch) who are all migrating to the Austin, Texas market.

Transaction Advisors

Switch’s financial advisor was Wells Fargo. Additionally, Switch’s legal advisor was Latham & Watkins.

Data Foundry’s financial advisor was DH Capital, who ran a robust, three-stage auction process. Additionally, Data Foundry’s legal advisor was Vinson & Elkins.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing. Mary has over 5 years of experience in research and writing for Data Centers.


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